How one of Mitt Romney’s etch-a-sketch tax proposals can save us from the fiscal cliff

Elections have consequences. And the big consequence of the 2012 election looks to be higher taxes for the rich. With President Obama still in office, that’s what will happen on January 1, 2013 when the Bush tax cuts expire, whether John Boehner likes it or not. The big question is whether Obama and House Republicans can make a deal undoing the rest of the so-called fiscal cliff.

They can. If they listen to Mitt Romney.

Romney got some well-deserved criticism for his chronically math-challenged tax plan, but he did have a very clever idea when it came to tax reform. Rather than take on specific tax deductions — and the constituencies ready to defend them — he would limit overall deductions. Such a cap raises revenue without raising marginal tax rates, and it raises the most revenue from the rich…

See the tax changes for people making less than $200,000? Of course not. That’s because the Romney’s tax plan would hardly raise their taxes. But households making between $200,000 and $500,000? They would pay a couple thousand more in taxes. Millionaires could wind up paying almost a hundred thousand dollars more…

The wealthiest households not only pay more than others under the cap, they pay most of the cap. In other words, households making a million dollars or more would pay 73 percent of the $59 billion a $50,000 cap would raise in 2015 if tax rates stay the same. Middle-class households mostly wouldn’t get hit because they mostly don’t take itemized deductions, and when they do they rarely take anywhere near $50,000 worth of them. Take a look at the chart below to see just how progressive a $50,000 cap would be.

Click on graph to enlarge

The idea is fiscally valid – meets the approval of the other geeks with whom I discuss topics like business and banking.

I do wonder who suggested it to Romney. He isn’t capable of an original thought about the weather or sex – much less tax policy. Scott Galupo of the American Conservative thinks he stole the idea from an earlier suggestion by President Obama.